California Joins Other States in Suing S&P

California Joins Other States in Suing S&P
The Justice Department asked a judge to spurn efforts by Standard & Poor’s Ratings Services to move 17 state lawsuits against the firm for allegedly shoddy ratings into federal court.

In a 12-page court filing Friday, U.S. prosecutors asked a federal-court judge in Connecticut to rule that the cases should be decided in state courts.

“There is no necessary federal component to the state-law claims, and hence no basis for S&P’s assertion,” the Justice Department said in the filing.

The New York rating firm, a unit of McGraw-Hill Cos., MHP -0.64% is trying to “create a federal component where none exists,” U.S. prosecutors added in the filing.

Eighteen state attorneys general have filed suits in various state courts alleging that S&P violated state consumer-protection laws by misrepresenting its ratings as independent and objective.

S&P has repeatedly denied wrongdoing. The Wall Street Journal reported earlier this week that lawyers representing the rating firm are seeking to move the lawsuits to federal court and combine them into a single case.

Merging the cases into a single lawsuit in federal court could help S&P limit its legal exposure by streamlining the potential damage claims against the firm.

In recent court filings from Connecticut to Colorado, lawyers for S&P contend that 17 of the 18 state-court suits should be removed from those courts because rating firms are regulated under U.S. securities laws. A California case isn’t part of the dispute.

The Justice Department said Friday that a 2006 federal law doesn’t prevent states from filing lawsuits in state courts for alleged violations of state law. State attorneys general made similar arguments in court filings this week.

Friday’s filing was made in a U.S. District Court in Connecticut because Justice Department officials have worked closely with the state’s attorney general, who sued S&P for alleged violations of state consumer-protection laws and unfair trade practices.

It isn’t clear when the judge will decide the jurisdictional dispute. The ruling will apply narrowly to the Connecticut case but is likely to be weighed by other judges who must decide on similar requests by S&P in other states.

On Feb. 4, the Justice Department alleged in a civil suit that S&P issued fraudulent ratings before the financial crisis that triggered losses to federally insured banks and credit-unions. U.S. officials are seeking more than $5 billion in damages.

Some state attorneys general flanked U.S. Attorney General Eric Holder at a news conference in Washington the next day. Potential damages in the state lawsuits could exceed the total sought by the Justice Department.

S&P has said the U.S.’s claims are “simply not true” and reflect excerpts from email and other exchanges that were “cherry picked” by prosecutors. An S&P spokesman had no immediate comment Friday.

To view the original article, click here: http://online.wsj.com/article/SB10001424127887324000704578390730041030310.html

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